logistics system and process in express delivery service companies
TRANSCRIPT
LOGISTICS SYSTEM AND
PROCESS IN EXPRESS
DELIVERY SERVICE COMPANIES
Hanzheng Zhu
Bachelor’s Thesis
May, 2010
Degree Programme in Logistics Engineering
Technology, Communication and Transport
DESCRIPTION
Author(s)
Zhu Hanzheng
Type of publication
Bachelor s Thesis
Date
25/05/2010
Pages
53+7
Language
English
Confidential
( ) Until
Permission for web
publication
( X )
Title
LOGISTICS SYSTEM AND PROCESS IN EXPRESS DELIVERY SERVICE COMPANIES
Degree Programme
Degree Programme in Logistics Engineering
Tutor(s)
Salmijärvi Olli
Assigned by
Xi’an Express Mail Service Logistics Company of China Post
Abstract
Express delivery services (EDS), as a young industry, are currently experiencing a rapid growth to
fulfill the increasing demand. With the aims of being fast, safe, controllable and traceable, EDS
companies have developed a quite different logistics network and systems in their logistics
process. The purpose of this study was to describe EDS network models, like the spoke-hub
paradigm, as well as the way of EDS processing. It was also studied how much of advanced and
automated technologies and methods, like geographical information system, are used for
optimizing the network, accelerating the delivery speed and improving services. The whole
logistics chain of EDS was to be presented in this thesis.
Express Mail Service (EMS), a large Chinese express delivery corporation, plays an important
role in this market. Its significant part, EMS of China Post corporation, is now experiencing hard
competition. This thesis went deeper inside the Chinese EMS company and found reasons that
have led to competitive advantages and weaknesses through using the SWOT analysis. The
research material included a lot of information and data from EMS company and its market and
from the author’s internship experience.
As a result, it can be stated that the Chinese EMS company should become more independent
and keep learning from foreign EDS companies and adopt a differentiated strategy based on its
advantage in the domestic network. In the end, development suggestions to improve the
company’s network and services and conquer the current challenges are given. The clients
expect faster, safer and more reliable EDS services with a good customer service to meet their
different requirements and growing demand.
Keywords
Express delivery services, express mail services, logistics system, spoke-hub paradigm, network.
Miscellaneous
1
Contents
1 INTRODUCTION ........................................................................................... 3
1.1 BACKGROUND ....................................................................................... 3
1.2 OBJECTIVES AND GOALS ........................................................................ 4
2. RESEARCH ................................................................................................. 5
2.1 RESEARCH METHODS ................................................................................ 5
2.2 RESEARCH TOOLS ..................................................................................... 6
2.2.1 ABC Analysis ................................................................................... 6
2.2.2 SWOT Analysis ................................................................................ 7
3 LOGISTICS PROCESS IN EXPRESS DELIVERY SERVICES..................... 8
3.1 CHARACTERS & SPECIFIC REQUIREMENTS OF LOGISTICS SYSTEM IN
EXPRESS DELIVERY SERVICES COMPANIES ....................................................... 8
3.2 INFORMATION MANAGEMENT ...................................................................... 9
3.3 DISTRIBUTION AND DELIVERY.................................................................... 11
3.3.1 Spoke-hub Distribution Paradigm ............................................... 11
3.3.2 Node Set and Route Plan .............................................................. 13
3.4 TRANSPORTATION .................................................................................... 15
3.4.1 Air Transport .................................................................................. 15
3.4.2 Railway Transport ......................................................................... 16
3.4.3 “The last kilometer” Transport ..................................................... 17
3.4.4 Others in Transportation .............................................................. 17
3.5 WAREHOUSING ........................................................................................ 18
3.5.1 Warehousing Characters in Express Delivery Services ............ 20
3.5.2 EDS Companies’ Warehousing Strategy ..................................... 20
3.5.3 EDS Companies’ Warehousing Operation .................................. 22
4 EMS COOPERATIVE .................................................................................. 25
4.1 HISTORY ................................................................................................. 25
4.2 EMS IN CHINA: HISTORY AND THE PRESENT .............................................. 26
5. ANALYSIS OF CHINESE EMS LOGISTICS SYSTEM AND PROCESS ... 28
5.1 PARCEL DELIVERING PROCESS ................................................................. 28
5.1.1 Post Office ..................................................................................... 28
5.1.2 Distribution Center ........................................................................ 30
5.1.3 Warehouse ..................................................................................... 32
5.2 DEPARTMENT COORDINATION AND THE FLOW OF WORK ............................. 33
5.3 NETWORK MONITORING ........................................................................... 35
5.3 EMS STRATEGY ANALYSIS ....................................................................... 37
6 COMPETITIVE ............................................................................................ 38
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6.1 SWOT ANALYSIS FOR EMS OF CHINA POST ............................................. 38
6.1.1 Strengths ....................................................................................... 39
6.1.2 Weaknesses ................................................................................... 40
6.1.3 Opportunities ................................................................................. 42
6.1.4 Threats ........................................................................................... 43
6.2 INTERNATIONAL COMPETITORS ................................................................. 43
6.3 LOCAL COMPETITORS .............................................................................. 47
7 DEVELOPMENT SUGGESTIONS .............................................................. 49
8 CONCLUSION ............................................................................................ 51
REFERENCES ............................................................................................... 52
APPENDIXES ................................................................................................ 54
APPENDIX 1. EMS COOPERATIVE MEMBERS .................................................... 54
APPENDIX 2. EMS COOPERATIVE CONTRACTED DELIVERY AGENTS ................... 60
FIGURES
FIGURE 1.EMS’s information system and operation process. ....................... 10
FIGURE 2. Airline spoke-hub paradigm (Stannered 2008) ............................. 12
FIGURE 3. Logistics network and distribution centers of China Post (Photo is
taken by myself, 2009) ................................................................................... 31
FIGURE 4. Distribution center of China Post (Photo is taken by myself, 2009)
....................................................................................................................... 32
FIGURE 5. EMS warehouse in Xi’an (Photo is taken by myself, 2009) .......... 33
FIGURE 6. EMS online tracking web page..................................................... 36
TABLE 1. Presentation of SWOT analysis ........................................................ 7
TABLE 2. EMS Size and Weight Limits (Source from Japan post website) .... 29
TABLE 3. SWOT Analysis of Chinese EMS .................................................... 39
TABLE 4. General comparison between Chinese EMS and four International
EDS groups. (Source from these companies WebPages) .............................. 44
TABLE 5. Average international delivery price of EMS and four international
EDS groups. (Source from: report of China Post and these companies
WebPages.) .................................................................................................... 46
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1 INTRODUCTION
1.1 Background
Express services, which are also called express delivery services (EDS), are
known to most of us. But 50 years ago, it was a brand new area for people. It
was born in the United States in 1960’s. In its short history, express services
have experienced a rapid growth and have expanded all over the world.
United States International Trade Commission (USITC) defines this industry
that “The express delivery services industry comprises firms that provide
expedited movement of document, parcels and other goods. These firms
maintain control over the shipments throughout the delivery process and
often use technology to monitor the location of each item.”(U.S. International
Trade Commission 2004, 6-1.)
Nowadays, there are many express service companies playing important
roles in the field of express service. The most famous groups, such as UPS,
FedEx, DHL and EMS, are known for the rapid and accurate delivery.
Integrating ground and air networks, they provide a world-wide range of
door-to-door services and specialized services. As the air transport develops,
the express services can reach longer distances and fulfill the “time-sensitive”
delivery. The modern express services are not only the rapid goods delivering,
but also the financial and information exchanging. Development of
information technology and computer science will benefit this industry.
Express delivery services industry is still growing today and will, probably,
keep growing in the near future. That is why this topic was chosen as the
target of this bachelor’s thesis.
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1.2 Objectives and Goals
Among the express services companies in today’s market, EMS, as a special
express mail and package service group, is formed by 154 countries’ post
systems. This cooperative became my target in finding out about the general
express delivery service process as well as the differences with other
express service companies.
In this thesis, the whole logistics chain, including warehousing, transportation
and picking in the express delivery service process is presented. Through
reading, the characteristics and features of logistics system in the EDS
industry could easily be found. Based on my internship experience, the
dissertation is focused on the Express Mail Service company of China Post.
Their logistics process was studied in this thesis, and it was described what
had been seen and what had been found. The logistics systems concerning
package handling, processing supervision, warehousing, transport and
distribution and information management were examined more closely.
From this point of view, the discussion expanded to the whole field of express
delivery service aiming at showing characteristics and specific requirements
of the logistics system in express services companies. It could find many
differences between express delivery services and other express logistics
services as well as the differences in their strategies and operations.
Then, the target company was examined to find out the competitive
advantages and potential threats. EMS’s strengths and weaknesses were
also analyzed comparing them to their competitors in the Chinese market.
Based on a market investigation, a result was arrived at in order to check the
current operation and develop their management.
5
2. RESEARCH
2.1 Research Methods
The bachelor’s thesis was mainly based on the internship experience at Xi’an
Express Mail Service of China Post in the summer of 2009. The analysis was
based on what was seen and experienced. During this period, I observed the
whole logistics process from the starting point to the destination. According to
these researches, the author tried to rebuild a completed delivering process
in the research part.
Besides, this thesis applied the knowledge which is learnt from school and
the needed information which is searched from proper sources. These
sources are mainly from some related literature, reports and annuals. The
logistics operation of some international express delivery companies also
enlightened me as to the SWAT analysis. That made that EMS’s competitive
advantages and the place which need to be improved can be seen. When
writing this thesis, part of information is from their websites and from the
e-mail contact with DHL and FedEx.
I really thank my contact person Tang Puyu, the manager of networking
monitoring department of Xi’an EMS cooperative. He conducted and taught
me during my intern period and gave me some good advice while I was doing
the thesis. He has worked for China post and EMS for 20 years. His
experience and opinion stimulated me to find some fresh ideas and bring me
into deeper consideration.
Based on the experience and information the author gained, the thesis will
analyze the current situation to arrive at the conclusion. The suggestions are
6
also given at the end.
2.2 Research tools
In the analysis, some tools were used to help the author to evaluate and
analyze the EMS’s current situation and strategies, which are discussed in
the following.
2.2.1 ABC Analysis
Villefredo Pareto (1848-1923), an Italian economist, discovered that 20
percent of the people controlled 80 percent of the wealth approximately 100
years ago. Pareto’s law refers to not only wealth, but also critical issues,
importance and so on. In the management, that means “approximately 20
percent of the products and customers generate 80 percent of the revenue”.
(Viale 1996, 36.)
So, the 20% of the customers who created 80% of the company’s revenue
are called “A” customers. The 30% of the customers and 50% of the
customers who created 15% and 5% company’s revenue respectively are
seen as “B’ and “C” customers. The same classification can be used in
products or parts for inventory planning or investment. (Op. cit. p, 36-37.)
Otherwise, the classify level can be more than three according to situation.
It is no doubt that companies should first pay attention to the customers in the
A level, and then to the customers in the B level and C level. But all
classifications should be based on careful investigation. Sometimes, there
are no clear differences between “B” customers and “C” customers. So, it is
important to remember that, when you facing the customers, the services
7
should be the same. Do not let your customers know that they are “B” or “C”
customers.
2.2.2 SWOT Analysis
“The key process used in situation analysis is SWOT analysis. SWOT stands
for: Strengths and Weaknesses as they relate to our Opportunities and
Threats in the marketplace” (Westwood 1997, 19.)
When analyzing a company or a product, it can be done from these four
aspects. Strengths refer to issues which attribute the person or company to
achieve the objectives, whereas issues which are harmful to achieving the
objectives can be considered as weaknesses. Opportunities refer to some
cases or conditions that can help company to achieve some possible goals.
On the other hands, some threats could do damage to the goals or the
current situation.
SWOT analysis includes finding your current strengths and weaknesses and
analyzing opportunities and threats that they will influence in future. “You can
then attempt to exploit your strengths, overcome your weaknesses, grasp
your opportunities and defend yourself against threats.” (Op. cit. p. 19.)
Before making a strategy plan, most people would list the Strengths,
Weaknesses, Opportunities and Threats on the same page like in this
following table:
TABLE 1. Presentation of SWOT analysis
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
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3 LOGISTICS PROCESS IN EXPRESS DELIVERY SERVICES
3.1 Characters & Specific Requirements of Logistics System in Express
Delivery Services Companies
Different with other logistics services, express delivery services focus more
on speed, safety and accuracy. To fulfill these goals, the whole logistics
process has to contain ground, sea and air network. That means cooperating
with other companies and other countries’ groups is necessary. Spreading
the range of services, express services companies have developed more
types of businesses. To save the customer’s time and work, the service is
started from the customer’s door. These services increase the width and
depth of express services, but also give high requirements to the logistics
system.
So, the logistics system in express delivery services has the following
specialties:
1. Each parcel has its own process and different speed. So, there are some
nodes to sort these different parcels in the logistics process.
2. Because of the different requirements from a number of customers and for
various goods, the system should handle these cases with a large amount of
information.
3. The geographic location of distribution centers, post offices and
warehouses is not concentrated.
4. Expanding the logistics service in new areas is always needed.
5. The location of each branch office is far away from others, which
sometimes leads to difficulty of management.
6. To cut the costs, express services companies do not use direct transport
from sender to receiver. They operate some logistics hub in which parcels of
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many customers are concentrated.
7. Door-to-door services need more staff and increase workload.
3.2 Information Management
According to these features, express delivery services companies have
developed an information network to fulfill the demand. In the network, they
can supervise and trace each package. They set many nodes in the process
and put the data into the system in each node. In this way, they can find the
mistake in time and know the responsibilities well.
This information network is formed by computers basing on the internet.
When receiving the parcel from customers, workers make the initial data
concerning the delivering information and weight. These data will be taken by
a barcode and a tag on parcel. At the same time, the information will be input
into local computers and transferred to the company’s main server. For the
safety reasons, this infromation should not stay in the local computer after
transferring. On the other hand, except the basic information about the parcel,
the information about the payment will also transfer to another computer,
which just handles the financial issues, connected with main server as well.
The third computer client is responsible for customer services including
responding to the inquiries and informing about the details. When the goods
arrive in warehouses and picking centers, they also have local computers to
input the information, and their operation is generally the same with what they
have done in the first step. So the same work is repeated in every node.
To publish the service’s price and computer news and to provide tracking
service, the express service company has its own website server connected
with the main server, too.
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EMS company, for example, is using such a way of information flow. The
following flow chart was made by the author to show this process clearly.
FIGURE 1.EMS’s information system and operation process.
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From the software aspect, EDS companies prefer using their own integrated
networking systems, which are based on EAI technology. This system could
integrate the company’s ERP (Enterprise Resource Planning), CRM
(Customer Relationship Management), SCM (Supply Chain Management)
and the database, to make communication and data exchanging freely
between different departments and branch offices. When adopting this
system, an EDS company would obey the following rules:
1. Align Plans to Strategy
2. Consolidate First, Integrate Second
3. Use a process-driven approach to develop end-to-end solutions
4. Establish clear lines of ownership and accountability
5. Enforce EAI architecture
6. Mandate integration requirements for new applications
7. Develop a common representation of data and process
8. Test early and often
9. Re-factor interfaces constantly so they never become legacy
10. Evolve business practices through experimentation
(Gable 2002)
3.3 Distribution and Delivery
3.3.1 Spoke-hub Distribution Paradigm
Many successful express delivery services companies, like UPS, Federal
Express and EMS, are implementing spoke-hub distribution. So, what is the
spoke-hub distribution paradigm and how does it works?
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The spoke-hub distribution system arranges the logistics network like a
bicycle’s wheel. In the center is a hub which connects many nodes linked by
spokes, and the goods are transported following the spokes. (Hudson 2003.)
The following diagram shows a typical spoke-hub diagram. In this figure,
there are two hubs, Los Angeles and Denver, linked with many nodes around
them. All parcels should be sent to the hub firstly, and then they are delivered
to another hub like Denver or Los Angeles. At last, parcels will be fetched by
these cities from the hubs.
FIGURE 2. Airline spoke-hub paradigm (Stannered 2008)
Express delivery companies have lots of nodes, which play roles of customer
services, distribution centers, warehouses, picking centers and so on. In their
network, a spoke-hub paradigm is a good way to cut the routes between
different nodes. In a network with n nodes and one hub, only n routes are
available, and each node only connects with the hub. But in a point-to-point
network with n nodes, it probably has n (n-1)/2 routes. (Babcock 2002)
The obvious advantage of using this distribution system is that it can cut off
the transportation costs, improve cycle time and reduce the inventory.
Because the goods are more concentrated, transport resource can be used
13
more efficiently. For example, the goods flow between a node in city A and a
hub in city B. Every parcel from city A should be sent to city B by airplane.
And in this airplane’s return round, it can take all of the parcels whose
destination is city A. So, the airplane can fly between two nodes with a full
capacity. For the same reason, the warehouse and facilities are also used
efficiently. Moreover, creating a new spoke is easy, rather than building a
direct point-to-point link. That is considered as an advantage for expansion.
Nevertheless, because each spoke is responsible for full capacity transport, it
could have risks, like a serious delay, if an accident happened. And, in this
network, the longer journey will not be suitable for the next-day delivery or
other express delivery. This system lacks in flexibility somehow, because the
spokes are mainly stable (Babcock 2002).
So, this system requires a careful traffic analysis and risk management. In
this way, a good route scheduling is needed.
3.3.2 Node Set and Route Plan
Nodes in an express network refer to receiving stations, distribution centers,
warehouses and other activity points in the delivering process. They are
always a logistics chain’s start points as well as its end points. The transport
of parcels between the origin node and destination node is called line-haul.
The origin and destination nodes form an od-pair. The parcels of one service
transferred between tow nodes are called the flow of the od-pair, and this
stable flow in the network becomes a regular route. ( Armacost, Barnhart,
Ware 2002.)
In express services, all parcels have to arrive at their destination on time.
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That is, all parcels of one service, including such as the picking-up process,
line-haul transport and final delivery to consignees, should be done before
the cut-off time of the corresponding service. It is important to arrange and
design nodes in a reasonable way, and to plan the routes well, because they
affect work efficiency, costs and customer services.
Generally, these origin and destination nodes would be set near the
customers to reduce regional transport. When setting a new node,
companies could carefully think about the land and labor costs and
infrastructures around. However, sometimes, setting too many nodes makes
inventory being dispersed, and that leads to more costs and longer transport.
A more important thing is the hub network design. The construction of a
line-haul network is better known as the hub network design. Designers
always face two problems. The first problem is the assignment of nodes to
hubs, arcs between hubs, and routes plan. The second one concerns the
number and the location of the hubs. (Meuffels et al. 2009)
A good hub network design will minimize the sum of transport cost, the sum
of transport time and the number of hubs. So, the designer will account all the
elements above by using some design models. For instance, designers could
use a hub consolidation model. Hub consolidation was introduced in literature
by O’Kelly. The idea is that flows between hubs might decrease the transport
rate arising from the greater capacity on these arcs. (O’Kelly 1986.) This
model will be used to decrease the unit transport cost for inter-hub flows.
Moreover, many big express companies are using the Geographical
Information System (GIS) to help them design hub networks nowadays,
considering logistics operation is inherently concerned with geographical
15
information. This system, which is based on information technology, can store,
analyze, check, integrate and display the data related to the position on the
Earth’s surface. Users can integrate different sets of data through a common
geographical database such as latitude and longitude. The results will be
displayed on a map. The same thing could happen when you enter the fleet
information, so that the system calculates your fleet savings. (Forster 2000.)
Companies could, through this system, optimize the routes, manage variable
costs, track the mobile assets and meet customer ’s requirements. Besides,
the GIS usage can spread to human resources management, production
development and procurement in the fields of producing, sales, marketing
and services. For example, Federal Express has used ArcInfo and GenaMap
(two GIS software) to measure the services standard and to build a
warehouse location model using the Visual Basic programming language
together with ESRI’s Map Objects mapping components. The revolution has
already come accompanied with the development of information technology.
That is why articles in US trade journals suggest that companies are using
GIS in supply chain management. (Forster 2000.)
3.4 Transportation
3.4.1 Air Transport
Because the delivering speed, somehow, reflects a company’s competitive
advantage, most express delivery services companies prefer using air
transport in long-distance delivery, especially in cross-border delivery; air
transport is no doubt a dominator. Many large express companies own
airplanes and airlines and usually set transshipment centers in airports.
These transshipment centers are in charge of picking and transferring. Small
16
EDS companies have to rely on transport agency, which have right to handle
air transport.
In many countries, the goods transport and customers transport are not
separated. The same airplane can take customers together with goods. That
means this operation, however, has to follow the airport arrangement and
flights’ schedule. Besides, air transport is always influenced by whether. So,
when train’s speed is accelerated, some companies put more goods on
trains.
3.4.2 Railway Transport
As the most safe transport way, railway transport becomes another main
choice for EDS companies. Railway transport is a kind of regular transport
way with high efficiency. It has obvious advantage in large capacity delivery
and in large scale goods delivery. Otherwise, some EDS companies provide
railway transport to fulfill different requirements. This type of transportation
can balance the speed and costs that become popular in domestic delivery.
Recently, the develop of cold-chain in railway transport encourages EDS
companies to choose this way when delivering goods like fresh foods,
medicines and flowers. EDS companies could also design carriage following
their requirement, such as setting temperature and humidity indicator, GPS,
temperature alarm and different temperature area inside carriage. It makes
the whole delivery process under control as well under monitoring anywhere.
Besides, considering discussion about global warming nowadays, railway
transport is an environmental friendly choice.
Railway transport, however, hardly be used in cross-border delivery. Firstly,
17
the scales of railway are different in different countries. Companies have to
arrange trains change. Secondly, the geographic elements affect delivery a
lot. Then, it is limited by complicated regulation and check when crossing
border. At last, train’s speed limits itself used in express delivery services.
Railway transport and air transport merely reach the area which has railway
or airport. As a door-to-door service, EDS companies have to use other
transport way to finish “the last one kilometer” delivery.
3.4.3 “The last kilometer” Transport
Comparing with long distance transport, more and more companies focus on
“the last kilometer” transport. That relies on a huge network and transport
tools. Currently, the first and the last journey of delivering from or to
customers use vehicles frequently. Vehicles are usually responsible for the
way from door to warehouse, train station and airport.
As a flexible transport way, vehicles dominate this range with low investment,
developing road transport technology and mature operation. But in some big
cities, the streets are so crowded that vehicles are unable to move
sometimes. In rush hours, government even limit amount of haulage vehicle
in some districts. Motorcycle and bicycle, sometimes, become transport tools
that faster than vehicles. Otherwise, express companies can solve problems
through increasing the frequency of delivering or changing delivering
schedule. To earn good reputation, most companies are willing to delivery on
time and diversify risk through this way, even it is costly.
3.4.4 Others in Transportation
Except limitation of transport ways, cooperating between long-distance and
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short-distance transport, coordinating of warehousing and transporting,
communication among different departments, information transferring and
passing customs influence the transporting costs and speed as well. A good
EDS company would regulate every transport step to keep goods moving and
accelerate transport process. Everything should be prepared before each
parcel enters the next step. And EDS company enable to track airplanes,
trains and vehicles any time.
Besides, transport process face the highest risk in the whole process of EDS.
Lost and damage would happen at any time, related with reliability of network.
The fine in this process could be considered as potential costs for express
services companies. (Most customers do not insure for their goods. If
damage or lost happened, EDS company will be in charge of fine which is 5
or 6 times of service fee).
As companies pursuing speed and efficiency mostly, express services
companies can not only rely on itself to handle the whole delivering process.
Therefore, cooperating other transport groups and using social transport
resource play important roles as well. Nowadays, more and more
professional air-freight companies and shipping agencies have appeared
becoming important players in this field. Cooperation is a good way to cut
investment and earn partners who are familiar with local condition.
Sometimes, new expansion always accompany with new cooperation.
3.5 Warehousing
Generally speaking, warehousing plays the five roles in logistics activities.
Store goods
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It means that we store goods in a particular place to prevent goods from any
kind of damage. This is the basic function of warehousing.
Control circulation
Warehousing can be divided into long-term and short-term, and the term of
warehousing decides the circulation. Otherwise, the market situation defines
whether companies store goods or let them into circulation.
Amount management
Firstly, it should balance the total amount of goods in and out. However,
clients can decide the amount of each time when fetching goods. The
managing amount of warehousing is important for express delivery services.
Quality management
One of warehouse’s responsibilities is that no or less quality changes
happened during storing.
Point to connect two steps
Because warehouse makes goods stop, it lefts enough space and time to
combine two steps as a buffer.
Business intermediary
Using the asset in warehouse, the owner can do business and accelerate the
circulation.
Meanwhile, developing warehousing can research more types of services,
increase products value-added, reduce costs and make the whole logistics
chain efficient.
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3.5.1 Warehousing Characters in Express Delivery Services
The same with warehousing in other logistics activities, warehousing in
express delivery services aims at in time, accurately and economical. As an
industry that focuses on speed, express services need to conquer the time
waste in every step. Warehousing has been considered as a good way to
increase the “third profit”. But, in express delivery services, the problems are
more complicated.
Firstly, the goods that express companies in charge are various. From foods
to medicine, from products to gifts, different goods have different size and
requirement. Secondly, each parcel has its own delivery time, which has to be
followed strictly in express delivery. Different types and different delivery
requirement lead to main problems of warehousing. So, that requires EDS
companies use separated strategy to handle delivery and information flow for
the purpose of cutting delivering frequency and distance and balancing costs
and profits.
Considering most warehousing in this field is short-term warehousing,
delivery companies always adopt sealed package to store goods. Besides,
training to staffs is another effective way to keep parcels from damage when
they are loading, unloading and carrying inside warehouses. Nevertheless,
the best way is to accelerate the circle time and keep low inventory. That’s
why good warehousing strategy and operation is so important for EDS
companies.
3.5.2 EDS Companies’ Warehousing Strategy
Warehousing strategy that includes warehouse’s design, parcels
management and rules has closed relationship with warehousing operation’s
21
efficiency.
Being suitable for rapid delivering, the design of warehouse need to arrange
storing place and working place reasonable that convenient for goods in and
out. Normally, the pass space in their warehouses is large being suitable for
equipments operation and goods in and out at the same time. On the other
hands, using the room of warehouse is another character in modern
warehouses, because many of EDS companies’ warehouses are located in
urban.
Moreover, managers of warehouses bring ABC analysis into parcels
management. Finding out type “A” parcels, companies could make the
specialized managing ways. Under this strategy, “A” parcels enjoy the priority
in warehousing operation, which are transporting inside warehouses,
information flow and goods in and out. Through this way, it reduces the
warehousing costs effect.
Besides hardware requirements, some EDS companies, like DHL, make
quota management. Warehousing quota can be considered as economic
index in warehouse’s activities, and managers can qualify each step by
number. These indexes not only reflect warehousing requirement but also set
objectives to staffs. Managing warehouses with numbers is convenient to
account and evaluate the process. But the quota is not unchangeable, it
would fluctuate with develop of warehousing level. As the flow amount of
goods become larger and larger, the quota management will play more
important role in warehouse.
Only having warehouses is not enough for EDS companies. To achieve the
goals of strategy, integrating warehousing technology, information
22
management and cost accounting is needed. Nowadays, warehousing is not
only an activity of storing goods, but also activities including sorting,
packaging and assembling. But these value-added services are always
ignored by EDS companies.
3.5.3 EDS Companies’ Warehousing Operation
Basically, every big EDS company has a strict standardized warehousing
operation rules. These rules could structure and limit operation for the
purpose of less damage and time waste and more efficiently.
Before the goods coming, warehouse managers already receive the detailed
information, which includes type, scale, package statement, arriving time,
storing time, warehousing requirement and so on. Based on this information
together with current statement of warehouses, warehousing department
would make a warehousing plan. When goods arriving, everything starts
running follow the plan based on warehousing regulation. Firstly, the goods
will be delivered to prepared area. Then, workers will check the goods as well
as scale and weight them. This is the core process in warehousing operation.
Sometimes, even manager will be responsible for this part. Company’s
monitoring department monitor and report checking process regularly. After
that, warehouse will centralize the goods and sort them generally.
The first principle of EDS operation is always pursuing speed. So, in EDS
warehouses, companies try to use more automated equipments under the
investment limitation, like using elevated forklift, stacker, automatic
transmission system. In order to decrease frequency of loading and
transmission, measurement and operation should be done at the same time.
But, somehow, as other processes, warehousing has to balance the
23
investment and profit. When choosing equipments and designing
warehouses, they always obey the rule that choosing the way which can get
back investment in the shortest time. (DHL Company 2007)
Otherwise, express delivery companies also divide warehouse into several
parts according to goods’ delivering time, destination and brand.
For example, most EDS companies have contracts with some big customers,
which are usually big companies’ sale department and customer service
department, online shop and local business agencies. In those cases, EDS
companies normally have a warehouse area to handle specific products from
them.
In conclusion, the whole warehousing operation should obey the four
principles:
1. In time
Loading, transmission and checking should be done in a limited time. For
example, goods would not appear in account without checking. Goods could
be in storage and money could transfer into account only if checking is
accelerated. Meanwhile, the payment and compensation has its own allotted
time. If operations exceed the deadline, bank and companies will no longer
take responsibility.
2. Accurate
No matter checking or other operations, making sure of accuracy is important
for warehousing. The wrong information could not only cause chaos but also
mislead the judgments.
3. Strict
24
It means every operation should follow the rules and laws that require
workers working with a good attitude and professional skills.
4. Economic
When checking goods, generally, checkers need to cooperate with loading
and carrying workers for saving costs. In addition, protecting the own
packages and preventing rude operation would avoid unnecessary costs.
25
4 EMS COOPERATIVE
Express service refers to a kind of delivery service that provides customers to
faster delivery with some surcharge. Express service, in general, is mainly
divided into two parts: express mail service and express package service.
Nowadays, the domestic mail service is usually governed by a country’s own
postal administration, while the international accelerated mail service is
governed by the EMS Cooperative since 1998. For the express package
service, the market is being shared by many competitive companies includes
many local companies and international express groups, which has received
the high reputation and have powerful express ability.
4.1 History
Before talking about EMS cooperative, an international organization has to
be mentioned – Universal Postal Union (UPU), which was founded in1874.
According to the UPU’s website, this organization is in charge of coordinating
postal polices among member nations and contribute to build worldwide
postal system. With 191 member countries, this multi-national agency plays
an advisory, mediating and liaison role. (UPU at a glance 2010)
As a much profitable part, comparing with traditional mail services, Express
service had been dominated by private companies. Some countries postal
department began to realize that they could also enter this area by using their
“natural” advantages that the existed network, good reputation and some
experience. So, they started their business providing express services.
UPU definitely realize the opportunities from combination of these express
26
services companies. Therefore, in 1998, Universal Postal Union created EMS
Cooperative. Currently, the EMS Cooperative enrolls 154 of the 191 UPU
member countries’ postal agencies and integrates part of their normal postal
services. Besides, seven EMS delivery agents are responsible for delivering
EMS items.
4.2 EMS in China: History and the Present
In China, China Courier Service Corporation (CCSC) provides EMS services.
This corporation is a 100% state owned company, which is a subordinate
company of China Post, and is the largest provider in China’s express service
industry currently.
The express services were brought in China after China’s reform and
opening up in the 1980's with the age less than 30 years. EMS services were
started in 1980 and have witnessed continuously development. Different with
some western companies, EMS take much market share both in domestic
delivery market and international delivery market. In domestic market, EMS
dominated the market, keeping more than 70% market share. In cross-border
delivering market, EMS had taken 80% market share in a long term until
1990’s. From 1990’s, the express market developed faster and faster as the
growth of Chinese economy speed up. International express groups entered
Chinese Express Market that lead to the drastic decrease in market share,
which is around 20%, of EMS cross-border express services. EMS has to
share the cake with companies like DHL, FedEx and UPS. But EMS still
control their field in domestic market. Actually, EMS has had its huge
competitive advantages. They have to face another competitor – the local
private express companies. Despite that most of them are still in small size,
they together have taken 75% market share in intra-city delivery market.
27
Now, EMS has established a continuously growing network. This network
covers over 200 countries and regions and up to 2000 domestic cities. EMS
currently employs over 20,000 courier staff and more than 15,000 courier
collection and delivery vehicles. In the domestic market, supporting by China
Postal Airlines, the company can fulfill the next-day delivery in 200 cities.
EMS, besides following the normal working area, has its own service such as
accepting order, cash on delivery, flower and gift express, warehousing,
settlement and so on.
28
5. ANALYSIS OF CHINESE EMS LOGISTICS SYSTEM AND PROCESS
5.1 Parcel Delivering Process
How exactly does a logistics system work at Chinese EMS? In the following
several sections, I will describe a whole delivery process from post office to
destination.
5.1.1 Post Office
The main work in post office is to pack the goods, input the data of each
parcel, weight the parcel and receive the payment. According to different
regulations for different companies, they sort parcel in many ways. For
example, according to the size and weight, the parcels can be sorted into two
types: big ones and small ones. The small type refers to the package that the
sum of length, height and width is no more than 100 cm and the weight is no
more than 10 kg. Otherwise, it will be thought as the big one. Besides, every
country or area has its own size and weight limits. This table shows some
limits to certain areas.
29
TABLE 2. EMS Size and Weight Limits (Source from Japan post website)
Country
Size
Weight
(kg) Maximum
length
Length +
Circumference
India 1.5m or less 3m or less 30
Rep. of
Korea 1.5m or less 3m or less 30
Singapore 1.5m or less 3m or less 30
Taiwan 1.5m or less 3m or less 30
China 1.8m or less 3m or less 30
Finland 1.5m or less 3m or less 30
France 1.5m or less 3m or less 30
According to the customer’s requirement about speed, the parcels are
divided into fast type and slow type. In domestic delivery, the parcel of fast
type always can reach the destination within 1 day by using air transport,
except some parcel’s destinations are small town or village. But the slow type
would take longer time by using railway and vehicle transport.
All the works above including packing, weighting, accounting and basic
sorting should be done inside the post office. At the same time, EMS staff
input the information to computer using scanners and makes the barcode,
which will accompany these parcels in the whole process. The information of
these parcels will be transferred to EMS main serve that delivery step can be
traced by EMS staff and customers.
EMS also provides on-the-spot service that carrier will take over goods by
visiting customers. Some work of post office will be finished in customers’
30
side. Besides, some big customers’ goods pass post office regularly or even
don’t pass post, because its operation is confirmed by contracts that they
don’t need this step at all.
Post office is the first line facing with customers. The employees have to keep
good attitude which stand for EMS company’s appearance. Many new staffs
begin their career from there. Moreover, post office can reflect EMS services,
competitive advantages and marketing information when contacting
customers. That is why EMS requires post offices report this information and
analysis regularly.
5.1.2 Distribution Center
EMS is adopting spoke-hub paradigm. All parcels and goods are centralized
to distribution center firstly, and then they, after sorting, are sent to destination
distribution centers. At last, nodes will fetch parcels whose destination are
them.
In China, such a big area, China Post has two levels of spoke-hub network,
based on division of province and big region. Now, there are 8 big
region-level distribution centers and 37 province-level distribution centers as
the following map shows.
31
FIGURE 3. Logistics network and distribution centers of China Post (Photo
was taken by the author, 2009)
Each province own 1-3 distribution centers which is responsible for collecting
parcels in province and finish the inter-province delivery. The regional
distribution centers, which connect with province-level centers, has helped to
finish the regional delivery and collect parcels in the region. Parcels would be
transferred between different distribution centers of different level in domestic
delivery, and, in international delivery, parcels should be centralized in few
cities like Shanghai and Guangzhou, which has export airport.
Fortunately, the author got an opportunity to visit the distribution center in
Xi’an, which is one of the most advanced centers that cover all picking issues
of northwestern part of China. The whole picking and distributing process is
completely done by computers. The only work run by human is scanning the
packages and put them on conveyer. The computer would send them to
different parts, which is assorted with different destination. This is Xi’an
distribution center.
32
FIGURE 4. Distribution center of China Post (Photo was taken by the author,
2009)
Interesting thing is that DHL and some other EDS companies also use this
center. For some reasons, EMS company have priority in this center,
comparing with other international express companies. The same thing
appeared when the packages through Customs. It would be thought as an
advantage for EMS when facing some big customers that has plenty of
parcels.
5.1.3 Warehouse
EMS warehouses are always located in urban area. Some of them used to be
old warehouses that belong to state-owned company. The new warehouses
generally are stereoscopic warehouse, thinking about higher and higher land
price, with automated equipments.
33
FIGURE 5. EMS warehouse in Xi’an (Photo was taken by the author, 2009)
Warehouse is a place to sort parcels as well. The arriving parcels would be
sorted according to their destination or next delivering node, like distribution
center or delivery department. Sometimes, these warehouses will also take
over some companies’ goods and manage those obeying contracts.
Nowadays, most warehouses handling EMS parcels still belong to China
Post. The warehousing department of China Post is managing warehousing
issues. Considering EMS transport issues rely on China Post as well,
somehow, Chinese EMS is still a department in China Post.
5.2 Department Coordination and the Flow of Work
As a company with high efficiency, EMS company requires good coordination
and cooperation between departments. The main arrangement of work flow
is in charge by Business Operation department, Data Collection department
and Delivery department, and the whole process is under Monitoring
34
department’s control.
Generally, the flow of work runs like that:
a). Delivery department arranges taking over parcels
b). Business Operation department inputs the data and transfer data to Data
collection department. (At the same time, carrier ’s notes are sent to
Monitoring department)
c). Makes receipts and sends them to Business operation department in 3
hours (Copies of receipts are sent to Monitoring department)
d). Operation department fills delivery notifications, and sends notifications
together with receipts to Delivery department in 24 hours. (except some
special cases)
e). Delivery department delivers parcels
f). Delivery department reports work to Monitoring department, and sends
notifications together with receipts to Monitoring department in 48 hours.
g). Monitoring department spot-checks the parcels and sends report to Data
collection department (All reports will be saved in company for analysis).
h). Data collection department sends receipts to Business operation
department.
i). Part of receipts need to be checked by customers, others are saved by
Data collection department.
In this flow of work, we can define different departments’ responsibilities and
the roles that they are playing in the whole process. To make every step run
well, EMS company has made detailed and standardized regulations, which
limit the working time and working schedule, and all the work flow is
controlled by the monitoring department.
35
5.3 Network Monitoring
When working in Xi’an EMS company, the author was in the network
management department. In this department, there are two people monitor
the networking and mail flow process and check some cases. Their
responsibilities are monitoring the whole process, checking some mistake,
spot-checking parcels in different step and report current situation and
analysis to headquater.
In office, they are working with EMS Track & Trace system, which use EAI
(Enterprise Application Integration) method. This system combine hardware,
software, data and processing of different branch offices and nodes, making
them like a unitive group. Offices in different area can share and trace the
data freely. And the office staff use computer with the model of client serve,
comparing with broswse serve for big customers.Besides, they also keep
frequently phone connecting with other departments.
On the other hand, part of information is published on EMS website, and
each customer could trace the process of delivering through Active Data
Warehouse (ADW) system. From June of 2006, EMS begin to use ADW
system, which is built by Teradata Corporation. As one of the biggest data
warehouse manufacturers, Teradata Corporation, the company from United
States, develop the first Active Data Warehouse in Chinese region to fuifil
that EMS deal with large amount of data and a number of visits. This system
not only handles the active delivery data, but also provides statistical analysis,
tariff management, billing and accounting, and customer relationship
management.
In 19 May. 2007, this data warehouse finished the first enlargement. In year
36
of 2008, this system dealt with more than 8 million information and 1.3 million
online inquiry per day. In rush hour, the visiting amount can reach 30
thousand per hour. Now, this ADW system can show the delivery information
in 5 minutes after finishing a delivery step or activity. It has increased the
timeliness of inquiry and meets customer ’s requirement better. Moreover, this
ADW could help EMS to collect information and data for analyzing, in order to
develop services and management.
FIGURE 6. EMS online tracking web page
Besides online monitoring, monitoring department has to visit and check the
parcels in different steps and departments regularly. Every week, staff from
monitoring department should visit post office, distribution center, customs
and some warehouse (most warehousing issues are in charge by China Post
warehousing department). In there, they check parcel’s weight randomly to
37
find any appreciable error. And financial respect is another check point to
monitoring staff. The staff would check receipts and notifications and bind
them up. As the sub-unit, post office has to report the situation and
information to monitoring department regularly. If some mistakes happened,
especially to big customers, monitoring department would take over the case
and be responsible for dealing with problem arising from a mistake.
5.3 EMS Strategy Analysis
Chinese EMS has been an important part of China Post, trying to become
more independent group in management. But now, as the most profitable part
in China Post, the profit from EMS comprise over 90 percent of total profit
and 47 percent of total turnover of China Post, and this money has helped
development of China Post. It leads to China Post focus on express delivery
area and put more resources in EMS.
In EMS’s profit, the big customers, including big companies, government
departments and e-commerce companies, contribute most of profit. So, in
EMS strategy, it uses ABC analysis to define the type of customers and focus
on the “A” customers. Actually, every regional office or post office has been
assigned quota of confirming the old customers and develop the potential
customers. In this way, most big customers have been taken care with
excellent services, enjoying priority in every step. That makes EMS running in
a high-speed development in profit.
Facing with such a big marketing cake, however, other EDS companies will
not let EMS dominate the huge profit. The drastic competition has appeared
in Chinese land.
38
6 COMPETITIVE
Until 2007, there were, in China, over 150 EDS companies handling
international delivering together with more than 10 thousand local companies
running business in domestic delivering. It forms a fragmented industry
because of three reasons. Firstly, China has a large market accompanied
with the most rapid growing of economy. The needs and potential needs of
EDS attract a number of EDS companies to enter this market. According to
Chinese Post Bureau estimation, in the near future, the growth of the EDS
market in China will develop over 30% yearly. Secondly, the low barrier to
enter this industry stimulates new comers and investment forwarding this
area for entry. Especially in inter-city delivery, small investment may earn big
repayment that more than expect. Then, the difference among EDS
companies’ services is small. The services and products can be copied and
replaced easily. Based on these characteristics of this industry, the
dissertation will go deeper inside EMS of China Post.
6.1 SWOT Analysis for EMS of China Post
For further analysis, the following table shows the general strengths,
weaknesses, opportunities and threats in Chinese EMS.
39
6.1.1 Strengths
China Post, starting business in 1911, has built the network for nearly 90
years. Until now, the network, which is the biggest postal network in the world,
formed by 57136 post offices (41196 post offices in the countryside), 1047
postal airlines (takeover one third air transport), 481 postal trains and 15
postal ships, can cover the whole area of the Chinese region. Chinese
Express Mail Services is a sub-unit of China Post, which is influenced by
State Post Bureau, relying on the postal network and system. It makes that
EMS can reach some remote places, which other EDS company cannot
Strengths
Using postal system
Can reach remote place
Good relationship with other
government departments
Dominate internal delivery in
Chinese market
Government support
Weaknesses
Strategy and operation
inflexible
Lack of professional workers
Overstaffing
Costs accounting
Types of goods in charge
Opportunities
Company reform
Learn management system
from international big
companies
Change equipments
Training staffs
Threats
New comers from abroad
Local companies
New technology revolution
TABLE 3. SWOT Analysis of Chinese EMS
40
reach, and become a dominator in EDS in some area. Nowadays, Chinese
EMS still has a huge advantage in network such that it is dominating the
domestic delivery.
Besides, as a state-owned company, Chinese EMS keeps good relationship
with other government departments, such as the Customs, Ministry of
Railways and some airline companies. For example, the parcels from EMS
enjoy priority in Customs. And EMS could easily make a business contract
with airlines companies (In China, all of airline companies having domestic
airline are state-owned companies).
For the purpose of protecting mail security, especially the mail among
government departments, the latest Chinese postal law, started from 1
October 2009, regulates that the parcels weighted less than 50 gram in
inter-city delivery and the parcels weighted less than 100 gram in city-to-city
delivery should only use Chinese EMS services.
Moreover, Chinese EMS has developed various services according to
Chinese market demand, like delivery service for student studying abroad,
flower and gift express, next-day delivery and so on. On the other hands,
EMS has business relationship with some electronic commerce companies.
To assure the products and services quality, EMS provides service of
cash-on-delivery. EMS has rights to receive and keep products payment from
buyers, and transfer them to suppliers when deal is done.
6.1.2 Weaknesses
Nevertheless, Chinese EMS has lots of weaknesses as a young EDS
company, comparing with some mature international EDS companies. Firstly,
41
under the control of China post, EMS does not have a flexible strategy.
Chinese EMS do not have its own logistics system, even its own internet
inquiry system. If they deal with an emergency, the complicated
decision-making process and bureaucracy will become barriers. In addition,
when facing with some big customers, EMS does not have too much space to
change the original price. Other EDS companies, however, usually provide
much lower price than normal in this situation. Another reason leading to this
situation is that EMS’s parcels are delivered through postal network together
with normal mail. That means the same postal vehicle could take both China
Post’s mail and EMS’s parcel. The same situation would happen that EMS’s
staff work in the China Post buildings and EMS’s goods are stored in China
Post warehouses. So, until now, Chinese EMS could hardly account the
accurate delivery costs, and it cannot cut the price too much.
Because EMS has been developed from postal system, it has its own
limitation in the type of services. Generally, EMS could only deliver the small
goods that below 30 kilogram with low value, comparing other EDS
companies take over high-value goods up to 68 kilogram. In this way, EMS
cannot satisfy many customers.
Besides, the Chinese EMS delivery depends on China Post staff. It lacks of
professional EDS workers with advanced EDS knowledge. There has been
rough handling in many places of Chinese EMS as well as its bad attitude to
normal customers. Somehow, like some other Chinese government
department, Chinese EMS has the problem of overstaffing.
So, when international competitors entered Chinese market and expanded
their services in 1995, large amount of customers have been moved to other
companies. In a long period, the growth of EMS is only 2%, comparing over
42
20% growth of DHL, TNT, UPS and other international companies.
6.1.3 Opportunities
China Post has realized the situation and decided to reform the structure of
management. Xi’an Express Mail and Logistics Services company is one of
the first independent Chinese EMS companies. Most staff is from the China
Post and some professional workers were brought in. This company is only
responsible for EMS issues and has plenty of rights to deal with EMS cases.
From 2002, China post began to update and invest in its network through
purchasing and using plenty of automated and electronic devices. At the
same time, Chinese EMS received government support and grew rapidly. As
the only profitable part, EMS has been continuously invested by the Chinese
government to fulfill the growing demand.
Moreover, EMS has begun to learn from international EDS companies, built
the same logistics system and EDS management. Besides simulating,
Chinese EMS has also trained its staff regularly. In slow business season,
some EMS staff would be sent to universities learning professional EDS
knowledge, or visit other EDS companies.
In these two years, due to the growing of the Chinese economy, recovering of
the world’s economy and developing of some new industries, Chinese EMS
has been greatly developing in the Chinese market. In the first season of
2010, EMS’s turnover reached 12.4 billion RMB (1 Euro=8.58 RMB) with 23.7%
increase rate. Among that, the turnover of cross-board delivery is increased
by 29.3%, even though the price of each cross-board delivery went up 11.1
RMB.
43
6.1.4 Threats
When joining WTO (World Trade Organization), Chinese government
promised that international EDS company could do business in the Chinese
market cooperating with Chinese company as a joint venture in the first 3
years. From the fourth year after joining WTO, that is 2005, international EDS
can do business in Chinese market independently. Besides, as Chinese EDS
market growing, more and more Chinese EDS companies join this
competition. It can be estimated that EMS of China Post will face more
drastic competition in Chinese market.
On the other hand, international delivery in Chinese EMS contributes most
profit. It is very important to confirm the customers. How to build and expand
its network through more closed cooperation with other EMS groups is
another problem for Chinese EMS.
In 2009, the amount of complaint increase to 3865, comparing 979
complaints in 2008. The rate of increase is 294.79%. The complaints are
centralized in problems of delay (1918 complaints) and cash-on-delivery (932
complaints). Except some unpredictable factors, like whether, the main
reason is that the current hardware and software cannot meet the growing
demand of EDS and higher requirement from customers. In some busy
seasons, like festivals or college entrance exam, a number of delay appeared
even EMS staff worked overtime.
6.2 International Competitors
Generally speaking, the most competitors threading EMS business in
Chinese market are from abroad. They are UPS, FedEx, DHL and TNT.
44
Considering the particularity of EDS and EMS of China Post, the following
analysis will compare these competitors from aspects of Market scale,
Network, Services and Price.
TABLE 4. General comparison between Chinese EMS and four International
EDS groups. (Source from these companies WebPages)
Express
Delivery
Chinese
EMS
FedEx TNT DHL UPS
Turnover
(in billion
dollar)
0.7 28 9 0.25 (euro) 30
Market share
(internationa
l delivery)
22 24 36 18 (UPS
and others)
Network
Coverage
200
countries
215
countries
235
countries
228
countries
215
countries
Network
Coverage in
China
2000 cities
and towns
224 cities 500 cities 50 cities 120 cities
Transport
Ability
9 airplanes
and more
than 10
thousand
vehicles
650
airplanes
and 140
thousand
vehicles
50
airplanes
and 19
thousand
vehicles
250
airplanes
and 18
thousand
vehicles
Own 250
and rent 350
airplanes,
149
thousand
vehicles
Staff
(thousand)
20 138 100 71 370
Market scale
According to the table above, we could find their market share in Chinese
market. Since 2005, the year that international EDS companies have entered
the Chinese market, the four international companies’ increasing rate of
45
market share has been over 20 percent yearly, comparing to 2 percent of
increasing rate of Chinese EMS. Especially DHL has occupied 36 percent of
the market share in international deliveries in the Chinese market. Besides, to
fulfill customer’s requirements, international EDS companies can handle
high-value goods, special goods and provide various value-added services.
In domestic delivery, EMS still has 70 percent of the market share. As
Chinese EDS market opened to foreign companies, DHL and UPS already
have rights to do business in domestic delivery. For example, in this area,
DHL provides “2-30 kilogram parcel delivering in 24 hours” and “30-1000
kilogram parcel delivering in 48 hours” that two kind of services, to avoid
competition with EMS in “parcel under 2 kilogram delivery”, which is thought
as Chinese EMS’s most competitive area.
Network
In world-level network, EMS is formed by different operators, as a loose
organization. Chinese EMS’s abroad delivery should be taken over by local
EMS operators or cooperators following UPU’s regulation. So, in this way,
EMS has weakness in global network compared to other four competitors.
But in domestic network, Chinese EMS has great advantage.
Nowadays, all of big EDS companies provides online inquiring and tracking
system, to monitoring every step in delivery. Besides, FedEx firstly uses
wireless monitoring method that big customer can track its goods in office
anytime. The FedEx operation center in Beijing has built automated customer
service system. This system connected with Beijing Customs’ parcel
checking system in purpose of sharing information and communication. UPS
has the same system connected with Chinese Customs from 1994. Chinese
46
EMS already built computer tracking system in 318 Chinese cities, but, in
international delivery, it only can track parcels to members of Kahala Posts
Group (KPG).
Price
TABLE 5. Average international delivery price of EMS and four international
EDS groups. (Source from: report of China Post and these companies
WebPages.)
EMS DHL FedEx UPS TNT
First
500g
Additional - - - - - - - -
Average
Price
(RMB)
224 80.1 220.7 77.1 233 79.2 236 88.7 88.7 71.6
In the table above, the difference of prices is big, and EMS’s price is in the
average level. Recently, however, international EDS companies begin to
adopt low-price strategy. In international delivery, these four EDS groups’
price is lower than EMS from 10% to 15%. On the other hands, DHL and
FedEx provide huge discount for heavy goods. For example, delivered 25 kg
parcel to Japan, the price of FedEx and DHL are 1200 RMB and 1188 RMB,
compared 2144 RMB for EMS.
Services
Chinese EMS service still has some distance in services with international big
EDS groups. DHL, UPS and TNT come to customer place to receive the
goods, and FedEx needs to phone reservation. Most customers, however,
47
have to go to post office to post their parcels, except some big customers. In
countryside, customers need to fetch the arriving parcels in post offices.
UPS, TNT and FedEx allow various ways of payment including pay in
advance, cash on delivery, paid by the third party and so on. DHL even allows
accounting payment in the end of month. Most customers using EMS have to
pay on the spot, even EMS also provide some new types of payment
recently.
UPS, TNT and FedEx handling one parcel would take 1-2 minutes in average,
and DHL would take 30 seconds in average. In compare, the time of handling
a parcel in EMS is around 5 minutes in average. In other aspects, the
services of EMS has not strong competitive. Take an example, if delivery
parcel to Japan from China, UPS and DHL can take over up to 68 kg parcel,
comparing that EMS can take over up to 30 kg parcel. Moreover, UPS and
DHL promise that the parcel will be delivered in 2 days in comparison with no
promise from EMS. EMS would deliver parcels on Saturday as usual, but
DHL and UPS will have a rest on Saturday.
6.3 Local Competitors
The growing of Chinese EDS market also attracts plenty of investors to enter
this area. Nowadays, over 10 thousand private EDS companies with more
than 1 million staffs join competition. Limited by capital and financing, most
private EDS companies are small-scaled companies. According to report
from National Investigation Bureau, in Shanghai, there were 467 private EDS
companies in 2006, and 90 percent of them are small companies whose
registered capital is below 200 thousand RMB. Among these private
companies, the number of companies which staff is less than 20 are 373,
48
comprising 79.9%. It leads to most operation in these companies is handled
manually with few automated equipments. Besides, most employees in these
companies are from other fields lacking professional EDS knowledge.
There is not a comprehensive national EDS regulation in China now, EDS
companies need to regulate business operation with their own laws. But
some private EDS do not have detailed regulation that caused chaos on the
operations.
Comparing EMS, private EDS companies adopt flexible strategy in price and
services. In the regional delivery, sometimes, some private EDS companies
provide low delivery price from 6 to 8 RMB. And in domestic delivery between
big cities, private EDS company is faster 50% than EMS. Besides, the
attitude of customer service of private companies is usually better than that of
EMS.
The latest Chinese Express Delivery Services Standard regulates the range
of price that threads business of local EDS companies. Moreover, Chinese
postal law, started from 1 October 2009, requires that the parcels weighted
less than 50 gram in inter-city delivery and the parcels weighted less than
100 gram in city-to-city delivery should only use Chinese EMS services.
These kinds of parcels had comprised 90 percent of private companies’
business.
49
7 DEVELOPMENT SUGGESTIONS
According the comparisons and analysis above, some development
suggestions are made to Chinese EMS.
Firstly, Chinese EMS should keep updating and developing its network both
in domestic and international deliveries. It should not be blind or excessive
expansion like in the current situation. This kind of investment does not bring
more profit; however, it makes more operation costs to EMS. The current
advantage of EMS is based on low labor costs and big network coverage that
is easy to simulate and replace. So, making the network standard and
modernized could increase the competitiveness of EMS. To achieve this goal,
EMS needs to follow the continuous technology revolution and use advanced
technology and method. Chinese EMS should also begin a deeper
cooperation with foreign EMS companies to enhance the link of global EMS
members. If EMS runs in that way, the closed cooperation relationship and
information share will make the EMS global network no worse than any big
international EDS companies’ and even better.
On the other hand, Chinese EMS could develop its own network based on
the current network of China Post to be able to offer faster and safer delivery.
This way, EMS could become more independent from China Post and have
more rights to handle the EDS business. Then, the independent Chinese
EMS will have clearer costs accounting and more flexible strategy. We can
expect that the service with a low price and high quality might appear.
Then, Chinese EMS needs to develop various services as an international
EDS company does. According to the previous comparisons, Chinese EMS
lacks in sense of marketing. Facing a market full of various demands, EMS
50
should adopt a differentiated strategy and introduce new products. From this
aspect, international EDS companies have mature products management
with fertile experience. Chinese EMS may learn about advanced
management and operation methods from them.
Moreover, professional staff is another important factor that decides a
company’s competitiveness. Chinese EMS, as the biggest Chinese EDS
company, can attract more professional staff as well as train its old staff.
Chinese EMS has already begun to set new staff assessment standard to
improve customer service and operation level.
Last but not the least, Chinese EMS should also build a customer record and
select cooperating partners carefully. It is better to cooperate with some
companies with a high reputation. After EMS started having cash on delivery
service, some swindler companies, which are electronic commerce
companies, deliver their low-quality products. They will receive a payment
when the customer receives parcels. Sometimes, customers find problem
with the products after receiving them. More complaints come to EMS, and it
is a damage to the Chinese EMS reputation. To protect its reputation and
customers’ profit, building a detailed cooperator and customer record is
needed as well as setting up regulation of selecting partners.
51
8 CONCLUSION
Express delivery services industry is experiencing a rapid growth. In this
profitable industry, opportunities together with competition form EDS
companies’ environment. More and more modern technology will bring big
changes in this area. From the previous study, the huge potential market and
better industry prospects can be seen. In this process, various logistics
systems have been presented, like spoke-hub paradigm, as well as new
information technology, like GIS method. Adopting these systems, EDS
companies optimized their logistics process in controlling costs and speeding
up delivery. Besides, according to its characteristics, the EDS industry has
shown some differences in logistics process and operation.
EDS in China will grow faster than ever, and EMS company has to face great
challenges accompany with reforms and development. Following the
previous description and analysis, the competitive strengths and weaknesses
that Chinese EMS appeared has been shown already. The change will
happen if Chinese EMS makes effort in the way of optimizing network,
following new technology, developing customer services and becoming an
independent business group. From the current data I gained, there are
enough reasons to believe that Chinese EMS will conquer the hardship and
occupy a significant position in the world-wide market.
As a huge industry with barriers of network building, reputation and
experience, the situation of the current main players will not probably change
in the near future. As economy and technology are developing, EDS can face
a further revolution. It will go further in the way of safe and rapid delivery.
52
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54
APPENDIXES
Appendix 1. EMS Cooperative members
EMS Cooperative members (Updated 15 March 2010)
EMS member Operator name
Afghanistan Afghan Post
Albania Albanian Post sh.a - EMS Service
Algeria Algérie Post
Angola EMS Angola
Anguilla Anguilla Postal Service
Antigua and Barbuda Antigua and Barbuda Post
Argentina Correo Argentino
Armenia Haypost - EMS Armenia
Aruba EMS Aruba
Australia Express Courier International
Azerbaijan EMS "Azerexpresspost"
Bahamas Bahamas Postal Service
Barbados Barbados Post - EMS
Bangladesh Bangladesh Post - EMS
Belarus RUE "Belpochta" - EMS Belarus
Belgium Taxipost s.a.
Belize Belize Postal Service
Benin Benin Post
Bermuda International Data Express - Bermuda
Bhutan Bhutan Post Express Mail Service
55
Bosnia and Herzegovina Public Enterprise BH Post
Botswana Botswana Post - EMS
Brazil Correios do Brasil
Brunei Darussalam Brunei Darussalam Postal Services
Bulgaria (Rep.) EMS Bulpost
Burkina Faso Sonapost - Burkina Faso
Burundi EMS Burundi
Cameroon Campost Express Mail Service
Canada Xpresspost - Canada Post
Cape Verde Correios de Cabo Verde
Cayman Islands Cayman Islands Postal Service - EMS
Central African Rep. Central African EMS
Chad Chad Postal Administration
Chile Correos Chile
China (People's Rep.) China Postal Express&Logistics Corporation
Colombia EMS Internacional
Congo (Rep.) Congo EMS
Costa Rica EMS Costa Rica
Croatia Croatian Post - EMS
Cuba* Correos de Cuba
Cyprus EMS/Datapost Cyprus Post
Czech Rep. Czech Post State Enterprise
Dem. Rep. of the Congo EMS Congo/CD
Djibouti La Poste de Djibouti
Dominica Dominica Post
Ecuador Ecuador EMS
El Salvador EMS El Salvador Post
56
Eritrea EMS - Eritrean Postal Service
Estonia Estonian Post Ltd
Ethiopia EMS - Ethiopian Postal Service
Fiji Post Fiji
Finland Itella Corporation
France Chronopost
Gabon EMS Delta+
Gambia* Gambia Postal Services
Georgia EMS Georgia
Germany* Deutsche Post
Ghana EMS Ghana
Gibraltar EMS Datapost Gibraltar
Great Britain Parcelforce
Greece Tachymetaphores ELTA S.A.
Grenada Grenada Postal Corporation
Guyana Guyana Postal Corporation
Hong Kong, China Hongkong Post - Speedpost
Hungary (Rep.) Magyar Posta Zrt.
India India Post
Indonesia PT Pos Indonesia (Ltd)
Iran (Islamic Rep.) Pishtaz Post
Iraq Iraq Post
Ireland An Post
Israel Israel Postal Company Ltd - EMS
Italy Post Italiane
Jamaica Jamaica Post
Japan Japan Post EMS
57
Jordan Jordan Post
Kazakhstan Kazpost
Kenya EMS Kenya
Korea (Rep.) Korea Post
Kyrgyzstan Kyrgyzstan Post
Lao People's Dem. Rep. Lao Express
Latvia Latvia Post EMS
Lesotho Lesotho Post
Lithuania Lithuania Post
Macao, China Macao Post - EMS
Madagascar EMS Mailaka
Malawi EMS Malawi
Malaysia EMS - Poslaju Malaysia
Maldives Maldives Post
Mali EMS Mali
Malta Malta Post Express International
Mauritania Mauripost
Mauritius EMS Speedpost Mauritius
Mexico Mexico EMS
Moldova EMS Moldova
Mongolia Mongol Post
Morocco EMS Chronopost International Maroc
Mozambique EMS Mozambique
Myanmar Myanmar Posts and Telecommunications
Namibia Namibia Post Limited
Netherlands* TNT Post
Netherlands Antilles Post Netherlands Antilles
58
New Zealand New Zealand Post Limited
Niger EMS Niger
Nigeria Nigerian Postal Service
Pakistan Pakistan Express Post
Panama (Rep.) Panama Post
Papua New Guinea Post PNG
Paraguay EMS Internacional
Peru Serpost - Express Mail Service
Philippines Phil Post - International Express Mail Service
Poland Polish Post S.A.
Portugal CTT Expresso
Qatar EMS - Mumtaz Post
Romania Posta Rapida (a division of C.N. Posta Romana S.A.)
Russian Federation EMS Russian Post – Subsidiary of FSUE Russian Post
Rwanda EMS Rwanda Express
Saint Christopher and Nevis Express Mail Service
Saint Lucia Saint Lucia Expedited Mail Service
Samoa Samoapost Company Limited
Sao Tome and Principe Sao Tome and Principe Post
Saudi Arabia Saudi Post
Senegal EMS Senegal
Serbia (Republic of) * Serbia Post
Sierra Leone Sierra Leone Postal Services
Singapore Singapore Post Limited
Slovakia Slposta
Slovenia Pošta Slovenije, d.o.o. (Slovenia Post)
Solomon Islands Solomon Islands Post
59
South Africa South Africa EMS
Spain Postal Exprés internacional (EMS)
Sri Lanka EMS Speed Post - Sri Lanka
Sudan Poste Rapide EMS
Sweden Posten AB
Switzerland Swiss Post International
Syrian Arab Rep. Syrian Post
Tanzania (United Rep.) E.M.S. Tanzania
Thailand Thailand Post EMS
The former Yugoslav Rep. of
Macedonia
EMS - Macedonia Post
Togo EMS Togo
Trinidad and Tobago TT Post
Tunisia Rapid-Poste Tunisia
Turkey PTT
Uganda EMS Courier Services - Uganda Post
Ukraine EMS Ukraine
United Arab Emirates Emirates Post - EMS
United States of America United States Postal Service/EMS
Uruguay Correo Uruguayo
Uzbekistan EMS Falcon
Vanuatu Vanuatu EMS
Venezuela (Bolivarian Rep.) Venezuela EMS
Viet Nam Vietnam Express Mail Service Company
Yemen Yemen Post
Zambia EMS Zambia
Zimbabwe EMS Zimpost
60
Appendix 2. EMS Cooperative contracted delivery agents
EMS Cooperative contracted delivery agents
Selected delivery agent Operator name
Austria Österreichische Post AG
Denmark Post Danmark A/S
Germany Deutsche Post AG
Netherlands TNT Post
Norway Posten Norge AS
Switzerland Swiss Post International